What Impact Is The Drop In Car Sales Having On The Ad Business?

Implications: Gas prices are up, auto sales are down. Automakers are looking for additional ways to cut costs. You can bet that advertising is going to be one of them.

Analysis: Amid the U.S. auto industry's worst new-vehicle sales year in a decade, all but the top two automakers, General Motors and Toyota Motor Corp.- hit the brakes on measured media spending in the first quarter.

And it doesn't look like it is going to get better soon.

Both GM and Toyota beefed up TV spending through March: GM to $309 million from $297 million a year ago and Toyota to $141 million from $119.8 million. They also increased online ad outlays: GM to $48 million from $30 million a year ago and Toyota to $22 million from $15 million.

Experts disagree whether the industry's early year expenditures will bring a cloud to the upfront for the segment. The upfront is when the automakers and other marketeers negotiate next seasons ad rates with the TV networks.

Many feel the automakers are feeling a lot of pressure on traditional media due to the tremendous financial pressures sparked by an expected decline of 1 million total new-vehicle sales this year.

Automakers are paying more attention to their marketing return on investment, especially at companies that are trying to rebound in their home markets, including the Detroit 3.

The domestic car companies are fighting for share, which leaves them trying to decide between share and profit. Look for more online spending, with magazines and broadcast TV networks taking the hit.

Ad spending often depends on the cadence of new-vehicle launches, and several automakers may hold their ad dollars until new models arrive.The companies with key vehicle introductions will spend big to ensure successful launches, and competitors historically have beefed up ad support for their older models to maintain share.

Online, Nissan Motor Co. spent only $3.5 million on ads through March compared to $12.8 million a year ago. Chrysler spent $12.8 million, $4 million less than a year ago and Honda's online spending was  flat. These figures do not take into account such things as Web sites and email promotions.

But digital is becoming vastly more important. Some 71 percent of Americans shop online before buying a car.

Going forward I'm sure the automakers think its a waste of ad dollars in this economic climate to try and persuade consumers who aren't predisposed to buy a vehicle. Look for an uptick in the third and fourth quarters, if the economy improves by the third quarter. If the economy does not snap back we'll continue to see delays in marketing expenditures.